After an exceptional Q2 both in Europe and the United States, the Q3 earnings season is proving positive, but clearly less spectacular. In Europe, 41% of companies have exceeded expectations and 21% have fallen short, leaving a net surprise rate of 20%, compared to the 40% recorded in Q2.
Additionally, although results continue to point to upward revisions of profits the pace is moderating: while in Q2 a net 21% of companies implied improvements in 12M EPS estimates, this season the figure drops to 10%. Sectorally, the strength of industrials, the weakness of luxury, and the first signs of deterioration in European banking stand out after several years of solid results in a context also marked by momentum pressure and the widening of sovereign spreads.
In the United States, 80% of companies continue to beat EPS forecasts but it would be the lowest percentage in the last three quarters while the main disappointment is coming in revenues: only 54% of S&P 500 companies have exceeded sales expectations, the weakest figure in the last 6 quarters. Q3 2026 has been one of the few quarters that has recorded positive profit revisions before the publication of results, thus raising the level of expectation.
Last quarter was the same, and yet results beat expectations clearly. As a consequence, meeting expectations is being rewarded by the market, although the magnitude of the stock market reaction is more moderate than usual +0.5% T+1 for companies that beat in EPS and revenues, compared to a historical average of +1.3%.
Upward revisions of profit estimates for both Q3 2026 and the SPX as a whole going forward have been limited as the median positive surprise in EPS stands at only +3% against consensus. EPS growth expectations for Q3 2026 have increased from +26.7%Y prior to the start of the earnings season to +29.3%Y currently.